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2017 (3) TMI 266
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....d the rival submissions and perused the material available on record. We find that the assessment order was framed u/s 143(3) of the Act, whereas, as is evident from page-1 itself, the ld. counsel for the assessee, Shri Vijay C. Kothari along with Shri Vijay Agarwal, appeared and were heard. The arguments advanced by the ld. counsel was duly considered, therefore, we are not satisfied with the argument of the ld. counsel for the assessee that proper opportunity was not provided to the assessee, consequently, this ground of the assessee is dismissed. 3. So far as, ground no. 2 & 3 with respect to computing the disallowance u/s 14A of the Act read with Rule 8D(2)(ii) at Rs. 60,04,84,033/- as against the disallowance computed by the assessee at Rs. 1,09,16417/- accepted by the ld. Assessing Officer and consequent disallowance u/s 14A of the Act r.w.r 8D(2)(iii) at Rs. 4,63,71,213/- as against the disallowance computed by the assessee at Rs. 1 lakh is concerned, the crux of argument, on behalf of the assessee, before us, is that own funds substantially covers the investment made by the assessee as per settled position of law and further the method of calculation followed by the asse....
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....ered by the Ld. Commissioner of Income Tax (Appeal) as well as by the Tribunal and decided the issue in favour of the assessee. The assessee has identified and quantified specific amount of interest expenses and also the investment with borrowed funds in the past and the investments have been co-related. It is also noted that even the Ld. Assessing Officer, as in the past, allowed the interest. The Assessing Officer was satisfied with the disallowances, suo-moto made by the assessee. It is noted that in all the earlier years i.e. Assessment Year 2008-09 to 2010-11, the issue of disallowance was considered by the Ld. Commissioner of Income Tax (Appeal) as well as the Tribunal. On the issue of disallowance, out of interest expenses, the Ld. Commissioner of Income Tax (Appeal) reduced the disallowance to Rs. 10 lakh and the Tribunal affirmed the order of the First Appellate Authority. For the year under appeal, the Ld. Commissioner of Income Tax (Appeal) affirmed the order of the Assessing Officer on the point of disallowance out of expenses. The Ld. Commissioner of Income Tax (Appeal) issued enhancement notice dated 20/02/2015, asking the assessee to file the reply. The assessee requ....
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.... the appeals filed by the Revenue. Rule 8D of the Rules it was held was applicable and the issue related to computation under sub Rule (2) and the three sub-clauses.Reference was made to clause (ii) of sub Rule (2) to Rule 8D of the Rules and it has been held:- "2.4. ... Only clause (ii) is involved in the present appeal. The AO considered the total interest paid by the assessee for allocating a sum of [Rs.] 36.76 lakh to the investments yielding exempt income. At the threshold it needs to be determined as to whether any interest expenditure can be attributed to the securities on which such exempt income was earned. The question of disallowance of such interest u/s 14A would arise only if some expenditure is said to have been incurred in relation to investment in such securities. In this regard, it is observed that the assessee made total investment of [Rs.] 6.33 crore in shares or securities resulting into exempt income. As against that share holder funds stood at [Rs.] 53.79 crore at the end of the year. Thus, it is evident that the amount invested in such shares or securities is far in excess of share holders' funds." 9. Reference was made to the decision of the Delhi ....
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....cifically prescribes the mode and method for computing the disallowance under Section 14A of the Act. Thus, the interpretation of clause (ii) to sub Rule (2) to Rule 8D of the Rules by the CIT(A) and the Tribunal is not sustainable. The said clause expressly states that where the assessee has incurred expenditure by way of interest in the previous year and the interest paid is not directly attributable to any particular income or receipt then the formula prescribed would apply. Under clause (ii) to Rule 8D(2) of the Rules, the Assessing Officer is required to examine whether the assessee has incurred expenditure by way of interest in the previous year and secondly whether the interest paid was directly attributable to particular income or receipt. In case the interest paid was directly attributable to any particular income or receipt, then the interest on loan amount to this extent or in entirety as the case may be, has to be excluded for making computation as per the formula prescribed. Pertinently, the amount to be disallowed as expenditure relatable to exempt income, under sub Rule (2) is the aggregate of the amount under clause (i), clause (ii) and clause (iii). Clause (i) rela....
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....no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act. Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st d....
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....h does not form part of total income; (ii) in a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula, namely : - A x B/C Where A = amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year ; B = the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ; C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year ; (iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year. (3) For the purposes of this rule, the "total assets" shall mean, total assets as appearing in the balance sheet excluding....
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....h expenditure. Sub-section (3) is nothing but an offshoot of sub-section (2) of Section 14A of the Act. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act. In other words, sub-section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the said Act and sub-section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. In both cases, the Assessing Officer, if satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may be, cannot embark upon a determination of the amount of expenditure in accordance with any prescribed method, as mentioned in sub-section (2) of Section 14A of the said Act. It is only if the Assessing Officer is not satisfied with the correctness of the claim of the assessee, in both cases, that the Assessing Officer gets jurisdiction to determine the amount of expenditure incurred in relation to such income whi....
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....n this regard. If one examines sub-rule (2) of Rule 8D, we find that the method for determining the expenditure in relation to exempt income has three components. i. The first component being the amount of expenditure directly relating to income which does not form part of the total income. ii. The second component being computed on the basis of the formula given therein in a case where the assessee incurs expenditure by way of interest which is not directly attributable to any particular income or receipt. The formula essentially apportions the amount of expenditure by way of interest (other than the amount of interest included in clause (i)) incurred during the previous year in the ratio of the average value of investment, income from which does not or shall not form part of the total income, to the average of the total assets of the assessee. iii. The third component is an artificial figure - one half percent of the average value of the investment, income from which does not or shall not form part of the total income, as appearing in the balance sheets of the assessee, on the first day and the last day of the previous year. It is the aggregate of these....
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....gard is correct and the determination must be made having regard to the accounts of the assessee. The satisfaction of the Assessing Officer must be arrived at on an objective basis. It is only when the Assessing Officer is not satisfied with the claim of the assessee, that the Legislature directs him to follow the method that may be prescribed. In a situation where the accounts of the assessee furnish an objective basis for the Assessing Officer to arrive at a satisfaction in regard to the correctness of the claim of the assessee of the expenditure which has been incurred in relation to income which does not form part of the total income, there would be no warrant for taking recourse to the method prescribed by the rules. For, it is only in the event of the Assessing Officer not being so satisfied that recourse to the prescribed method is mandated by law. Sub-section (3) of section 14A provides for the application of sub-section (2) also to a situation where the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under the Act. Under the proviso, it has been stipulated that nothing in the section will em....
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....ssessing Officer when he arrives at his satisfaction under sub-section (2) of section 14A. As we shall note shortly hereafter, sub-rule (1) of rule 8D has also incorporated the essential requirements of sub-section (2) of section 14A before the Assessing Officer proceeds to apply the method prescribed under sub-rule (2)." 3.13. The sum and substance of the foregoing discussion is that section 14A of the Act postulates and states that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income, which does not form part of the total income under the Act. Under sub-section (2) of Section 14A of the Act, the Assessing Officer is required to examine the accounts of the assessee and only when he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to exempt income, the Assessing Officer can determine the amount of expenditure, which should be disallowed in accordance with such method as prescribed i.e. Rule-8D of the Rules, therefore, the Assessing Officer at the first instance must examine the disallowance made by the assessee or the claim of the assessee that no expenditure was incurred to....
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.... the principle of res judicata or estoppel by record, which applies to civil Courts, does not apply to income-tax proceedings but, yet for the sake of consistency and for the purpose of finality in all litigations, including litigation arising out of fiscal statutes, earlier decisions on the same question should not be reopened unless some fresh facts are found in the subsequent year.-Radhasoami Satsang vs. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC) applied. (Para 6) The same issue, namely, whether the assessee is entitled to relief under s. 80-I or not, was decided by the Tribunal in favour of the assessee in respect of asst. yr. 1992-93, which order has now been followed by the Tribunal while disposing of appeals for the three years in question. The AO disallowed assessee's claim only on the ground that similar claim had been disallowed in earlier years. No fresh material has been brought on record by the lower authorities, warranting fresh consideration. Admittedly, order of the Tribunal for asst. yr. 1992-93 has not been challenged by the Revenue. Similarly, orders of the Tribunal on the issue, pertaining to asst. yrs. 1995-96 and 1997-98 have attained finality....
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....ribunal in the case of Smt. Darshana B. Doshi ITA No.5462/Mum/2012, order dated 07/06/2016 deliberated upon the issue of consistency and decided in favour of the assessee, therefore, the ratio laid down therein, squarely covers the present appeal before us. We are aware that the doctrine of res-judicata does not strictly apply to the Income Tax Proceedings, however, where the Department had been taking consistent stand in a particular way (in the case of the present assessee in its favour) and the Department has not pin pointed any distinguished facts, therefore, U-turn is not permitted. More specifically, when in earlier and later years, the identical issue was decided in favour of the assessee. Respectfully following the ratio laid down in the aforementioned cases, from the view point of consistency. In the impugned year before us, the assessee filed return declaring income of Rs. 15,63,72,847/- on 28/11/2011 and also declared books profit of Rs. 132,62,63,171/- u/s 115JB of the Act which was later revised to Rs. 13,98,29,240/- on 22/03/2013 under normal provisions of the Act and Rs. 132,62,63,170/- of book profit u/s 115JB of the Act. The ld. Assessing Officer scrutinized the re....
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....sessee, therefore, in the present Assessment Year also, the same has to be followed. However, we find that instead of following the rule of consistency, the Ld. Commissioner of Income Tax (Appeal) enhanced the disallowance under Rule-8D(2)(ii) for an amount of Rs. 60,04,84,033/-, which is under challenge before us. We find that the Tribunal vide order dated 27/03/2015 (ITA No. 202/Mum/2013 and 207/Mum /2013) for Assessment Year 2009-10, followed the decision of the Tribunal in the case of assessee itself for Assessment Year 2008-09 with respect to disallowance made by the Assessing Officer under rule-8D(2)(ii) and 8D(2)(iii) of the Rules along with the disallowance of the administrative expenses. In that case, the Ld. Commissioner of Income Tax (Appeal) restricted the disallowance to Rs. 10 lakh against the suomoto disallowance made to the tune of Rs. 1 lakh. The disallowance to the tune of Rs. 10 lakh was upheld by the Tribunal against the claim of Rs. 1 lakh by the assessee. So far as, the contention of the ld. counsel for the assessee that the disallowance may be restricted to Rs. 1 lakh only, is concerned, we are not satisfied with such reasoning because the rule of consistency....
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....-10 for ready reference and analysis:- "2.3. If the observation made in the assessment order, reasons for reopening the reassessment, material available on record, reasoning contained in the impugned order and the assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that the facts, in brief, are that the assessee declared income of Rs. 188,50,28,066/- in its return filed on 29/09/2008 which was processed on 27/07/2009, u/s 143(1) of the Act. Since the case was selected for scrutiny notice u/s 143(2) of the Act was issued to the assessee on 04/08/2009. The Assessing Officer vide order dated 27/12/2010, framed u/s 143(3) of the Act, determining the total income at Rs. 191,99,06,040/-(Assessment Year 2008- 09). The Assessing Officer received information from ITO- 25(1)(4), Mumbai, vide letter dated 25/04/2012 (received by the Assessing Officer on 01/05/2012) that certain payments amounting to Rs. 43,50,00,000/- were made by the assessee company by way of advances to M/s PRS Developers (proprietor Shri Nilesh J. Thakur) on various dates in Financial year 2007-08 and the said parties accounted such receipts towards expenses related to developm....
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....eassessment proceedings, initiated u/s 148 of the Act, as invalid and further whether a new material was available with the Assessing Officer for reopening the assessment? 2.6. We have perused the assessment order, reasons recorded, information provided by the ITO of Shri Nilesh Thakur, factual finding recorded in the impugned order and also considered the arguments advanced from respective side. We find that the primary facts relating to all the transactions entered by the assessee during financial year 2007-08 were very much available before the Assessing Officer when he framed the original assessment u/s 143(3) of the Act, therefore, no new material was made available at the later stage. Broadly, the reason for reopening is based upon the finding arrived at by the ITO of Shri Nilesh Thakur and it can be said it was a merely borrowed satisfaction. In a landmark decision the Hon'ble Apex Court in Kelvinator of India Ltd (2010) 320 ITR 561 has evolved a broad principle as under what circumstances reassessment can be framed. Likewise in Green World Corporation vs ITO (2009) 314 ITR 81 (SC), the Hon'ble Apex Court held that the order passed by the Assessing Officer at the ....
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....ee capital available. As on 31/03/2008 the assessee was having total amount of Rs. 500,81,91,218/- (Rs. 203,02,00,000 as share capital and Rs. 297,79,91,248 as reserve and surplus) and as on 31/03/2009, total Rs. 621,01,17,406/-. The totality of facts clearly indicates that the notice u/s 148 was solely issued on the basis of information received from ITO 25(1)(4), having jurisdiction upon Shri Nilesh Thakur. The basic requirement section 148 is that the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment, thus, the law does not permit such a action. The following decisions supports our view:- 1) CIT vs Kelvinator of India Ltd. (2002) 256 ITR 1 (Del.) 2) Sheth Brother vs JCIT (2001) 251 ITR 270 (Guj.) 3) CIT vs Corporation Bank Ltd. (2002) 254 ITR 791 (SC) 4) Garden Silk Mills P. Ltd. Vs DCIT (1999) 237 ITR 668 (Guj.) 5) CIT vs Hickson & Dadajee Ltd. (1980) 121 ITR 368 (Born.) 6) Jindal Photo Films Ltd. vs DCIT (1998) 234 ITR 170 (Del.) 7) Garden Silk Mills vs DCIT (1996) 222 ITR 68 (Guj.) 8) Mercury Travels DCIT (2002) 258 ITR 533 (Cal.) 9)JCIT vs Georg....
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....pports our view. The Hon'ble Calcutta High Court in S.P. Agrawal vs ITO 140 ITR 1010 held that statement by third parties cannot form the basis for reopening. We find that the ld. Assessing Officer merely on the basis of information received from another ITO without ascertaining the correctness of the information mechanically issued notice u/s 148. The only basis of issuing the notice u/s 148 was merely the later information received from ITO 25(1)(iv). The totality of facts clearly indicates that no new material came to the possession of the Assessing Officer leading to conclude that the income has escaped assessment, thus, issuance of notice for reopening and reassessment order passed u/s 143(3) r.w.s.147 of the Act was rightly held to be unsustainable in law. The existence of tangible material is necessary to ensure against an arbitrary exercise of power, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income tax (Appeals). This ground of the Revenue is, therefore, dismissed. 3. So far as, deleting the disallowance of Rs. 34,01,095/-, u/s 36(1)(iii) of the Act is concerned, we are reproducing hereunder the relevant finding of the ld. First Appell....
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.... ShriJanardhan Thakur and his entities in favour of the appellant. 13.3. Having regard to the above admitted facts recorded in the suit filed by the appellant before the Hon'ble Bombay High Court which are duly supported by records and documents filed as annexure before the Hon'ble Bombay High Court, the amounts advanced by the appellant are only for acquisition of lands in the Project areas of Panvel, Alibaugh, Pen and Raigad district. The appellant has produced records and documents in support of the transactions entered into with Shri Nilesh Janardhan Thakur and his group entities. All facts obtained from the records and documents reveal that the appellant had provided funds to Shri Nilesh Thakur for land acquisition in the project areas. In view of the same, any contrary submissions/explanations given by Shri Nilesh Thakur during the course of his assessment and appellate proceedings cannot be considered as a foundation for arriving at any negative inference in the case of the appellant. 13.4. The fact that Shri Nilesh Thakur, during the course of his assessment proceedings for A.Y.2008-09 and 2009- 10 had explained that he had received amounts towards....
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....purposes. Accordingly, it is held that the disallowance computed out of claim of deduction of interest u/s. 36(1)(iii) was not called for In the aforesaid facts. 13.5. Even further to the afore-stated facts, the appellant's A.R's have also submitted that the appellant has a common pool of funds i.e. own funds and borrowed funds and that the appellant had sufficient own funds as on the date of advancing funds to Shri Nilesh Janardhan Thakur. It was submitted that the funds in the bank account were fungible and merely because there was negative balance in the current account on a particular date, it cannot be inferred that the payments made was out of borrowed fund It was also submitted that the factum that the funds were fungible has been accepted by the AD himself in so far as the AD has restricted the disallowance of interest only till the date when there was positive balance in the current account maintained with the bank. The appellant's A.R's in support, relied on the decisions in cases of Hon'ble Supreme Court in the case of Munjal Sales Corporation v CIT (supra) and Hon'ble Bombay High Court in CIT v Reliance Utilities and Power Ltd. (supra) where....
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....that as per audited accounts .. assessee's own funds as on 31/3/2002 stood at Rs. 25, 136.76 crores and, therefore, interest free loans given to its subsidiaries should be considered as having been given out of its own funds. It was contended that assessee had' not taken any specific interest bearing loans for advancing interest free loans to its subsidiaries. It was submitted that in view of the fungibility of the funds available, it can be legitimately presumed that the interest free loans given to the subsidiaries had been given out of own funds of the assessee company deployed in the business. It was also contended that the net profit after tax and before depreciation during the year stood at Rs. 7054.84 crores. Thus, the net profit for the year under consideration exceeded not only the incremental loans given to the subsidiaries during the year but even exceeded the total interest free loans of Rs. 2988.98 crores given to the subsidiaries as on 31/3/2002. It was also contended that in the absence of any nexus between the interest bearing borrowed funds and the interest free loans given to subsidiaries and considering the fungibility of funds and the fact that own funds....
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.... was held that if interest free funds were sufficient 10 meet the investments mode, in that case a presumption is established that the borrowed capital was used for the purpose of business and the interest expenditure is deductible under section 36(1)(iii) of the Act. The similar view has also been considered by the Hon 'ble Calcutta High Court in Wool Combers of India Ltd., J 34 ITR 219 (Cal) s wherein it was held that if there were sufficient profits available to meet the advance fax liability and the profits were deposited in the overdraft account of the assessee,' in such a case it should be presumed that the taxes were paid out of profits of the year and not out of the overdraft account for the running of the business. Considering subsequent decision of the Hon'ble Jurisdictional High Court in the case of Reliance Utilities & Power Ltd. (supra), wherein it was specifically held that if interest free funds available to an assessee is sufficient to meet its investment, it can be presumed that the investments were made from the interest free funds available with the assessee. Therefore, considering the fact that the assessee had its own funds more than the loans given....
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....isting of capital and reserves as on 31/03/2008, whereas, the assessee advanced Rs. 43.50 crores to Nilesh Thakur for aggregating land in terms of appointment letter dated 16/07/2007, thus, we find no infirmity in the conclusion drawn in the impugned order as the ld. CIT (A) has already placed reliance upon the decision from Hon'ble Apex Court in Munjal Sales Corporation, from Hon'ble jurisdictional High Court in Reliance Utilities & Powers Ltd. (supra) and the decision of the Tribunal in Reliance Industries ltd. (ITA No.3082/Mum/2006) order dated 28/05/2012. His stand is affirmed. This ground of the Revenue is also dismissed. 4. So far as, the merits of the case is concerned the factual finding recorded by the ld. Commissioner of Income Tax (Appeals) is reproduced hereunder for ready reference and analysis:- "13.1. As held by me hereinabove, the order passed by the AO is not sustainable since the notice issued for reopening of assessment was invalid. However, the issue raised in ground of appeal no.3 is also adjudicated hereunder since the A.R.'s have made detailed submissions on merits of the case also. On merits of the case also, I find that the AO has comput....
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....see claims that these payments were made towards acquisition of land in and around Alibaugh and other areas in Raigad District. While Shri N. J. Thakur states that the amounts were received towards the development of project at Samata Nagar, Kandivali (E), Mumbai and for development of World Trade City at Garodia Nagar, Goregaon, Mumbai. Further light on the .nature of these transactions is thrown by the findings of the ITO-25(1)(4), Mumbai and C!T(A)-35, Mumbai in the individual assessments of Shri N.J Thakur for the A.Y.2008-09. This is discussed hereunder: f. Para 5.4.7 From the above it is clear that Shri NJ Thakur claimed to be a partner with my assessee and claims to have received money as advance for various projects in Bombay. However, neither Shri NJ Thakur nor my assessee have submitted a single documentary evidence regarding their association with each other through partnership or through appointment as consultant / agent / any other relationship. My assessee has not recognized Shri N. J. Thakur as a partner and no partnership agreement was made. Shri N. J. Thakur could not produce any evidence whatsoever regarding the alleged projects he has undertaken on behal....
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.... assessee or Shri N. J. Thakur to show what is the business purpose between them. It is therefore held that the sums paid has not been utilized by my assessee for the purpose of its business. I therefore hold that no deduction out of the same can be allowed either as expenditure or allowed to be capitalized under the head 'work-inprogress'. This being the case, the only other issue to be seen is the source in the hands of the assessee for having advanced this Doney and the tax implication thereon. Accordingly, in the course of assessment proceedings, the AR of the assessee has been asked to explain as to why proportionate disallowance for the interest bearing funds utilized for non business purposes should not be disallowed for which the assessee simply stated that the payments are wholly and exclusively for the purpose of business. The submission of the assessee has been considered, however the same is not acceptable in absence of any evidences. Accordingly, the interest disallowance on such payments is discussed hereunder;" 13.2 Amid appellate proceedings, the appellant's AIR has strongly pleaded against the A.O's action and filed a detailed writ....
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.... borrowed funds solely for the purposes of its business activities. The lands proposed to be acquired in the project areas was wholly and exclusively for the purposes of our business. The entire amount of advance was reflected in the Balance sheet under the head 'Current Assets-Advance for land.' 1.The appellant has a common pool of funds i.e. own funds and borrowed funds and the own funds, as on the date of advancing funds to Shri Nilesh Janardhan Thakur, were in excess of the amounts lent. We rely on the decisions in cases of Hon'ble Supreme Court in the case of Munjal Sales Corporation vs CIT and Hon'ble Bombay High Court in CIT vs Reliance Utilities and Power Ltd. wherein it was held that where the capital and profits are more than the interest free funds advanced, then it has to be presumed that such interest free advance were given out of interest free capital available. The appellants own funds as on 31.3.2007 and 31.3.2008 were as under:- As on 31.3.2007 As on 31.3.2008 Share Capital 82,00,000 203,02,00,000 Reserves & Surplus 171,45,01,507 297,79,91,248 Total 172,27,01,507 500,81,91,248 2. Even for the previous y....
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....Advances/or land'. Shri Nilesh Janardhan Thakur by his letter dated 22ndMarch 2010, informed the appellant that the payment received was used for acquiring properties and that the surplus funds had been kept in fixed deposit and that the properties would be transferred in favour of the appellant as soon as possible. However thereafter, Shri Nilesh Janardhan Thakur, neither refunded the monies nor transferred the properties to the appellant. In these circumstances, the appellant filed Suit No. 2576 of 2011 against Shri Nilesh Janardhan Thakur, PRS Enterprises & others in. September 2011. Subsequent thereto Shri Nilesh Janardhan Thakur agreed to settle the matter by trans/erring all the moveable and immoveable assets in favour of the appellant. The Hon'ble Bombay High Court passed an order dated 19thOctober 2011 in the aforesaid Suit and decreed the monies, assets and properties, illegally misappropriated by Shri Janardhan Thakur and his entities in favour of the appellant . 13.3 Having regard to the above admitted facts recorded in the suit filed by the appellant before the Hon'ble Bombay High Court which are duly supported by records and documents filed as anne....
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....no contradiction in between the explanation given as regards the nature and purpose of advances given by the appellant to Shri Nilesh Thakur. The admitted stand of Shri Nilesh Thakur in the appellate proceedings for A. Y 2009-10 is duly supported by the records. Hence, the only inevitable conclusion that can be inferred is that the appellant had advanced monies for acquisition of lands at Alibaug, Pen, Panvel and other areas in and around Raigad district, which is explicitly evident from the 'letter of appointment issued by the appellant company dated 16/07/2007 in favour of Shri Nilesh J Thakur and subsequent acceptance fetter dated 19/07/2007given by Shri Nilesh J Thakur to the appellant. The land acquisition in project areas is during the course of the regular business activity of the appellant. The funds advanced by the appellant to Shri Nilesh Janardhan Thakur are thus held to be for appellant's business purposes. Accordingly, it is held that the disallowance computed out of claim of deduction of interest u/s. 36(J)(iil) was not called for In the aforesaid facts. 13.5. Even further to the afore-stated facts, the appellant's A.R's have also submitted th....
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..... The AD has stated that assessee was asked to prove the nexus between source of funds out of which advances were given to its subsidiary companies and interest free or' own funds available with the assessee. The assessee filed details and stated that the assessee had given loans and advances of Rs. 2988.98 crores to its subsidiaries as on 31/03/2002, out its own funds and internal accruals except to the extent of relying 'upon the decision of Hon'ble Kerala High Court in the case of V.I. Baby &: Company, 254 ITR 248 and decision of the Hon'ble Bombay High Court in the case of Phalton Sugar Works Lid, 208 ITR 989 disallowed the said interest of Rs. 11,19,382/-. Being aggrieved the assessee filed appeal before the first appellate authority. 5.2 It was contended on behalf of the assessee that assessee's own funds were far in excess of the interest free loans given to its subsidiaries: It was contended that as per audited accounts.. assessee's own funds as on 31/3/2002 stood at Rs. 25,136.76 crores and, therefore, interest free loans given to its subsidiaries should be considered as having been given out of its own funds. It was contended that assessee....
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.... that in view of above decisions, the disallowance of interest is not justified and the same should be deleted. 5.5 On the other hand, ld. D.R relied on the orders of the authorities below. 5.6 We have carefully considered the submissions of the ld. representatives of the parties and orders of the authorities below. We have also considered the cases relied upon by the authorities below as well as the cases cited by ld. A.R (supra). There is no dispute to the fact that the assessee's own funds are far in excess of the interest free loans and advances given by the assessee to its subsidiary companies. The Hon'ble Bombay High Court has held in the case of Reliance Utilities & Power Ltd. (supra) that if there were funds available both interest free and overdraft / or loans taken, then presumption would arise that investment would be out of interest free funds generated or available with the company. It was held that if interest free funds were sufficient 10 meet the investments mode, in that case a presumption is established that the borrowed capital was used for the purpose of business and the interest expenditure is deductible under section 36(1)(iii) of the....
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....w of the same, the addition so made by the A. 0. is deleted. Thus, this ground of appeal is allowed. 3.4 In view of my decision in appeal for A.Y.-08-09, wherein the facts are identical to the facts as in the year under consideration, the reopening of assessment in annulled and the disallowance of interest of Rs. 2,46,16,438/- is deleted in the year under consideration for the reasons stated in my appellate order For A.Y.2008-09. Thus, taking note of all the factual position of the case, I consider in proper and appropriate to hold that the A.O. was not justified in his action. Accordingly the appellant's these grounds of appeal are allowed." 4.1. If the factual finding recorded by the ld. Commissioner of Income Tax (Appeals), we note that (as contained in para-13.4) Shri Nilesh Thakur, during the course of assessment proceedings for AY 2008-09 and 2009-10 duly explained that he received the amounts and during the course of enquiries before various authorities he took a consistent stand that advances were given for land aggregation and admitted to have received the funds from the assessee company. Shri Nilesh Thakur also admitted before the Hon'ble High Court regard....